Government ramps up R&D tax incentive

Research, Science and Innovation Minister Megan Woods and Revenue Minister Stuart Nash today announced the design of the research and development (R&D) tax incentive after extensive consultation with businesses.

The consultation process prompted significant changes to the tax incentive originally proposed. The rate will be higher, the threshold lower, and the definition more inclusive.

The key changes include:

  • A credit rate of 15 per cent, a $120 million cap on eligible expenditure, and a minimum R&D expenditure threshold of $50,000 per year
  • The inclusion of State Owned Enterprises, industry research cooperatives (including levy bodies), and minority-owned subsidiaries of Crown Research Institutes, Tertiary Education Organisations and District Health Boards
  • A definition of R&D that ensures the credit can be accessed more easily across all sectors, including the technology sector
  • A limited form of refundable tax credits which will mirror the R&D tax-loss cash-out scheme run by Inland Revenue.

The Ministers said the Government had set aside $1 billion for this incentive.

Work to increase R&D spending to 2 per cent of GDP over 10 years was part of the Coalition Agreement between Labour and New Zealand First.

Revenue Minister Stuart Nash said a balance has been struck between including as many businesses as possible in the scheme, and “upholding the integrity of New Zealand’s tax system”.

“We have learned from international best practice how to incentivise R&D expenditure and retain trust and confidence in the tax system. The new policy meets the rigour of international schemes, and will support businesses to undertake genuine R&D.

“We received a lot of feedback from businesses that it was particularly important to include a form of refundable tax credits for start-ups and loss making businesses in the first year of the tax incentive. This is why we have introduced a temporary measure that will mirror the current R&D tax-loss cash-out scheme.”

Mr Nash assured all businesses that having a more comprehensive form of refunds in the R&D tax incentive is a high priority to have in place for the 2020 tax year.

The Ministry of Business, Innovation and Employment’s website provides further information  HERE. 

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